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An expected US$1 billion injection from development partners by year-end is expected to bolster the economy, Finance Minister, Dr. Mohammed Amin Adam, has stated.
It comes amidst glimmers of broader economic recovery with Gross Domestic Product (GDP) surpassing its 2023 growth target, achieving a 2.9 percent appreciation.
Albeit, the cedi continues to face depreciation pressures with year-to-date depreciation sitting at 12 percent, a development, the minister maintained is an improvement over almost 30 percent depreciation in the same period last year.
Sustained demand for the US dollar from local businesses continues to deepen the pressure on the local unit. Also, there are ongoing concerns about the inflationary trend. April 2024 inflation dipped to 25 percent year-on-year, with food inflation dropping to 26.8 percent.
Databank Research cautions that the upside risk to inflation, which could induce further upticks in the headline print, may fuel more speculative demand for the USD and weaken the GH¢.
The US Federal Reserve is set to announce the inflation rate for April 2024 this week which could hint at the Fed’s policy rate path during the Jun 2024 meeting.
Databank Research believes a downward trend in the US inflation will help ease the cedi’s woes. With the local currency reaching GH₵15 this week, traders caution that they are transferring the costs to consumers, resulting in a notable rise in the prices of goods and services.
Some economists have proposed that the Central Bank be converted into a Currency Board as another option for economic stabilisation. In a currency board system, the local currency is anchored to a foreign currency (reserve currency), and the exchange rate is strictly fixed.
Whatever be the case, the current rapid depreciation of the local unit against its foreign trading partners has brought uncertainty to businesses as they call for official intervention to allow them to overcome the challenges they face as a result of the situation.
Importers are wailing the retailers have indicated costs will be passed onto the consumer which anticipates that the cost of living will again rise and become unbearable.
Assurances of fiscal injection by the donor community provides temporal relief, we expect the managers of the economy to institute steps to bring cost of living down.
